B.C. throne speech acknowledges importance of housing supply on affordability
In its recent speech to the throne, the B.C. government added a laundry list of measures that were not included in its election platform. Regardless of the motivations for this manoeuver, the speech included an important admission on housing:
“The single most important action governments can take to make housing more affordable is to work with local governments and the private sector to increase supply.”
Metro Vancouver is Canada’s most expensive housing market, as well as being a very desirable place to live—the two points are not mutually exclusive. While there are many factors driving housing demand in Vancouver, there’s no reason the housing stock can’t grow at a much faster rate in response to demand—if it weren’t for excessive red tape.
Strong demand for housing sends a market signal to developers that building more housing units is likely to be profitable. But in order to do so, developers must comply with a raft of regulations that can slow down or even derail projects entirely. When regulations artificially slow growth of housing supply, prices can escalate if a growing number of potential buyers and renters bid on a dwindling stock of available units. Unfortunately, evidence suggests this is happening in much of the Lower Mainland, particularly in Vancouver.
To quantify the impact of government policies on the supply of new housing, the Fraser Institute began surveying housing industry professionals three years ago to estimate the impact of local government decisions on a variety of metrics relevant to building new homes. These efforts resulted in six studies exploring land-use regulation across Canada’s most desirable urban markets, including B.C.’s Lower Mainland.
Among other things, these studies have found great variation in permitting times, uncertainty and costs among municipalities. Crucially, the City of Vancouver fared very poorly on many of these metrics, impeding the ability of developers to meet growing demand for housing units in the city.
To show the link between the regulatory hurdles such as typical timelines developers face to obtain building permits, and the costs and fees associated with regulatory compliance, we used data obtained through the surveys to compare the actual change in the housing stock in some of Canada’s largest cities to the level of growth that would have been expected had municipalities across Metro Vancouver harmonized regulations. In other words, if highly regulated cities were only as regulated as the average city, how much more housing would we expect to have been built?
Perhaps unsurprisingly, we found that regulation at city hall can hamper the housing supply. In particular, long and uncertain timelines can severely reduce the ability for markets to respond to demand. This has led to fewer new housing units being built in Vancouver proper than if the city’s regulations were more closely in-line with the regional average (Langley Township) let alone if its regulations were closer to high-performing Burnaby.
In short, supply matters.
It’s unclear what policies will come from “[working] with local governments and the private sector to increase supply,” as noted in the throne speech. Nevertheless, it’s helpful to see the beginnings of a more balanced discussion on housing in British Columbia.
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